Unpopular Opinion: Let Restaurants Fail


CBS News ran a story on Jun 19, 2020 entitled "We Bailed Out Banks. Should We Bail Out Restaurants?" The answer to this question should be a resounding "no."


I guess you could say that I am an eternal optimist. Lately, I have been noticing all the silver linings of this terrible crisis. Not only has the environment become cleaner because of us driving and working less, but it also seems that Americans have finally started to wake up to some hard truths in our country like systemic racism, income inequality, and corruption at the highest level. Furthermore (and not too far removed from the previous points), there is something else we should examine at this time of dramatic change, and once we see it for what it truly is -- an exploitative monster -- we will call for its “defunding” as well. What I am talking about is the restaurant industry, and the garbage it has been feeding us for years.

This is a precarious topic to navigate. Restaurants are one of the largest job providers in our country. And not only that, restaurants provide an income for many of those who have been lower wage earners historically, such as single women, immigrants, and minorities. In fact, restaurants employ more minority managers than any other industry. This is all very consequential, thus this conversation about the industry's future must be had.


10 percent of the entire American workforce works in the restaurant industry, which equates to nearly 15 million jobs. If all of these people were permanently put out of work, it would wreak havoc on the economy. Based on the title of this post, you may be thinking, that is exactly what I want. That, however, could not be further from the truth. The main objective of this post is to shine a light on an industry that was broken to begin with, so that when you hear calls in the weeks ahead for a bailout for this industry "that did nothing wrong," you will understand that any bailout for restaurants is equivalent to putting a band-aid on a wound that needs stitches. It is a temporary fix at best, and thus a huge waste of taxpayer money.

Heading into 2020, the National Restaurant Association projected 899 billion in sales across the industry for the year. Obviously the forced shutdowns had a huge impact on these projections. In the past three months, the industry has lost 120 billion dollars. And even with re-openings happening across the country (to our own detriment), by the end of the year the new estimate from the National Restaurant Association is a net loss of 240 billion. Re-openings or not, 75 percent of restaurant owners say they will not turn a profit in the next six months.

I find it interesting that we are throwing around dollar amounts of 899 billion this way and 240 billion that way, yet every time I read about the restaurant industry the words “razor-thin margins” keep coming up. Let us explore this point further. This phrase presents us with a paradox. It is at once a completely accurate statement, yet at another time it is a complete fabrication used to deceive us.

To see how the statement can be both true and false simultaneously, one needs only to look at the example of McDonald's. Anyone who has seen the movie The Founder, which stars Michael Keaton as McDonald’s “founder” Ray Kroc, discovered that the secret of McDonald’s success. The "secret sauce," if you will, is real estate. That is to say, McDonalds owns the land beneath their restaurants, and that is all the difference in the world. One California bakery owner explains the difficult position that restaurant owners are in, "Because most people running restaurants aren't the owners of the real estate they can't dictate the cost of running a business."



According to the Independent Restaurant association, 85 percent of independent restaurants may have to close their doors for good because of the pandemic. For these restaurants, lamenting “razor-thin” margins is unfortunately all-too-true, but when McDonald’s does it, their complaints should fall on deaf ears. While it may be true that the owner of a particular McDonald's restaurant may be put in a difficult position because of corporate mandates, policies, and objectives, that is very different from the local pizza restaurant called “best pizza” or “popular pizza” or some other generic name, that really cannot make rent this coming month, and will thus be forced to shut its doors for good.

Razor thin margins or not, let us take a moment and put things in perspective. During this crisis, many families have been struggling to pay their rents and mortgages. Too often, when a family cannot pay their rent or mortgage, you hear insensitive capitalists say, “They should have planned better” or “They should have had an emergency fund.” I wonder what those same people say, when I have the same response for the business that likewise could not weather the storm, so to speak, and pay their bills. I am willing to bet that many of those same people would disagree with me in this instance, not realizing their hypocrisy. Nevertheless, the point remains the same, unless we are willing to give more to the American people directly, then giving anything more to restaurants would be completely absurd.

The problem with the restaurant business is not its greed and/or the razor-thin margins that are used as an excuse for maintaining the status quo, it is the complete exploitation of its workers. In what other industry is a $2.19 minimum wage allowed? I have already written extensively about the oppressive impact that tipping has on restaurant workers in my post: "The Tipping Point: 3 Reasons Why Leaving a Tip Has Got to Go." What is more, the off-the-books hiring of illegal immigrants, also allows room for exploitation and wage gauging as well.

Do not let restaurant owners fool you. They are oftentimes the biggest opponents to fair wages, immigration reform, and cleaner agricultural practices. Granted, some of them really are just trying to serve good food and provide jobs for the community, but unfortunately, the way in which they oftentimes approach these goals leaves much to be desired.

If we allow restaurants to just return to business as usual, then we are letting a valuable moment slip through our hands. Furthermore, restaurant workers need protection now more than ever. Think of how ridiculous it is to even have a dine-in restaurant open during a pandemic. The server must wear a mask, but the customer, who must take off the mask in order to eat, will be mask-less? We know that masks protect the wearer from the non-wearer. It’s like the fight to ban smoking in restaurants all over again. We know that the customer is potentially harming the worker, yet we allow it to continue, and chalk it up as some kind of perverse “cost of doing business.” In other words, once again, the restaurant worker is used as a pawn in a larger chess match being played between owners and landlords, not caring who is put in harm’s way as long as the king is protected.

Responses

Letting restaurants fail could leave 15 million out of work, some of whom are the most economically vulnerable in society. Is that better than bailing restaurants out and allowing them to continue unchallenged?

The answer is yes. I do not believe that we should allow any full time worker in this country to exist on a subsistence level in the name of doing business. This is emblematic of embracing mediocrity.

Much of the country stopped working for two months, and what many of us realized was that the world did not stop as a result. Even the stock market today is not that different from where it was before this whole thing began. In fact, the NASDAQ market is higher now than it has ever been. The point is, we need to look at everything differently now, and the restaurant industry is no exception. In fact, because of the prominent role it plays in our society, it should be one of the first things we transform for the better.

In the meantime, if anyone should be getting a bailout it is the workers who have been exploited by money-driven owners, whose margins are so razor-thin they will cut your throat with them to get ahead.

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